3 Effective Ways in Which Poverty Can Be Reduced by Blockchain Technology

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There are a number of ways in which digital developments have been helping society. However, when we talk about the economically marginalized communities, the situation is discouraging – to say the least. Many such communities are not able to get really significant benefits out of digital developments.

On the contrary, it has even increased the gap between the living standards of rich and poor by empowering rich people to enjoy a much better life than their poor counterparts.

However, with the help of Blockchain technology, the economically marginalized section of the society can also be benefited. If used in a strategic manner the Blockchain technology can help the poor people to gear up their income and enhance their live standards. Most importantly it can help such marginalized people to join the mainstream. In this article, we will discuss 3 different ways in which Blockchain technology helps poor people.

Helps in managing the petty funds

One of the major reasons for increasing poverty is that the people, who lack financial resources, also lack the proper means to efficiently manage the same.

Though sounding a bit peculiar, it is perfectly true that one needs to manage the funds efficiently no matter how meager they are. Of course, it will not add to their savings but it will certainly cultivate a healthy financial habit that can help them in the long run. However, the people at and below the poverty line are not able to manage their transactions. In fact, due to their very small funds, it is not practical for them to start or manage the bank accounts.

More importantly, the majority of them are not well acquainted with the banking terms and processes that make things even more difficult. Thus this difficulty in accessing the banking system not only disturbs the financial discipline but also discourages them from understanding the real value of the money.

One cannot cross the borders of poverty without understanding the real value of money. It is unfortunate and pathetic but equally true that many banks (even the small ones) would hesitate to add such customers to their regular clientele.

However, Blockchain helps the people living below the poverty line to adopt a simple yet fully secured way of managing their funds in a streamlined manner. The people don’t have to visit a bank or involve in complex formalities like documentation, filing forms, signing a cheque, etc. to carry out the transactions. With the help of blockchain technology, they can easily and quickly carry out the transactions with full confidence.

Promotes entrepreneurship

Most of the poor people are either unemployed or involved in some type of petty profession- Physical laborers, ground workers, mine workers, and other such petty jobs.

Now, if such jobs had the ability to eradicate poverty, then many poor people who have been involved in such jobs for many years should have become financially dependent. The major problem with these jobs is that they require people to work for long hours and exert physical labor. At the end of the day, the workers are not in a condition to think about financial management.

Besides, the work ambiance of such jobs is depressing- both in terms of the treatment that they receive and their physical surroundings. However, one of the best ways to cross the border of poverty is to start one’s own business. It might seem to be somehow surprising but it is completely true that starting one’s own petty businesses- even a makeshift kiosk where one man can barely enter- can be the best way to make a stable income and gradually increase the earnings.

In countries like Nigeria many small-time watchmen who don’t have their own houses- not even a room- and are living in small security quarters (think of small booths) – sell petty daily use items like toothbrush, toothpaste, soaps or biscuits to support their facilities in some small ways. Even to start at such small levels these people need a loan but lack the required banking knowledge or identities (most of them hail from small villages) to get secured loans.

Such people don’t have any other option but to take loans from the traditional money lenders- many of whom take their advantage in many ways. Interest rates are really high and terms of repayment/penalties are outright exploitative.

The clever moneylenders design the repayment/interest strategy in such a way so as to create a black hole for the borrower that forces them to borrow more money even before that could clear the previous loans. Besides, the lenders also tamper extensively with the records in order to augment the interest rate/amount.

The semi-literate or illiterate borrowers are not able to carry out the complex calculation and agree to pay a higher amount of interest. It is a vicious cycle that doesn’t allow poor people to overcome poverty.

However, the Blockchain technology helps in microlending while promoting complete transparency due it immutable technology that fully eliminates the chances of tampering with the records. It can also help the borrowers to track their principal and the present payable amount (after adding the interest).

It can also promote transparency and discourages unethical practices. In this way, the Blockchain technology can help millions of poor people who take petty loans frequently and from multiple lenders. It can allow poor people to effectively manage the multiple loans and update themselves on the current status of the amount to be repaid.

Promotes activities that can help the welfare programs

Poverty can be termed as a peculiar disease. In fact, it is a combination of symptoms, disease, and even the cause! The people at or below the poverty line are not able to pay towards education, health and other meeting basic necessities of life. It results in more diseases, unemployment and pathetic living conditions. In fact, it discourages even the next generations to get rid of poverty.

It is this nexus of poverty, illiteracy, and unemployment that produces generations after generations of poor people who are marginalized, exploited and live in the pathetic conditions with almost o hope. Though there are a number of programs run by government agencies as well as NGOs to relieve the poor people, many such programs either lack motivation or are plagued with corruption. The root cause of such inefficiency or corruption is the lack of a proper tracking methodology and various ways to tamper the data.

However, the Blockchain technology can actively help in discouraging such corrupt tricks and tactics as it is immutable, public and 100% transparent. It easily brings the corrupt officials under close scrutiny and with the right strategies the misuse of funds can also be detected. Hence the economically marginalized communities can enjoy the best benefits out of such welfare programs aiming to offer better healthcare and education services to them.

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